But aren’t you ignoring that if you pay off the principle with newly issued bonds, your debt has not risen? In this respect, it is like paying off one credit card with another. The total debt doesn’t change. Obviously, there is a very brief period in time where your debt does increase, in the credit card case, because the transactions are not instantaneous.
You mentioned the principle of 1000$ needing to be paid. But if we borrow 1000$, and use that to pay the principle, our debt doesn’t increase, thus no default.
Obviously, this gets into the question of exactly how the debt ceiling law was written. But it would be poorly written if it didn’t take this into account.
What is more, isn’t it an issue of when exactly that debt is rolled over (within the month)? If they are reasonably well staggered, and the new issuances never breach the debt ceiling, then even this time gap between paying the principle, and selling new bonds, doesn’t seem to even be an issue.
Exactly. I’m trying to find the actual debt ceiling law, but am about to give up and go to bed.
My bet is that it’s not so precise. I’m certain that our government could very easily play this shell game without running afoul of the law.
And even if they did, they wouldn’t give a crap. We’re talking about an organization that LOVES funny accounting.
So it’s a winner and Jack Black is wrong. ;-P
You want to run the US FedGov like a in debt American runs their house, using one credit cart to pay another. Leaving aside how pathetic that is, ok, let's see if it works.
You say "if we borrow $1000". But we can't. The debt ceiling is reached. You want to pay the VISA bill with the Mastercard. But the Mastercard has a $10,000 limit and you've hit it!
To pay the VISA card with the Mastercard you must raise your limit on the Mastercard. The GOP won't let that happen. That's what the argument is about. So - no credit increase = no ability to pay VISA card = DEFAULT.
That is exactly where we are as a nation. The only way to stay above water is to incease the Mastercard limit. Failing to do so means we will miss payments and our credit rating will suffer.
There are only two reasons to support that.
1. You are not that bright and you are listening to the idiotic ramblings of all the "conservative" pundits and many conservative politicians saying "it doesn't matter".
As I have shown above this is FALSE.
2. You don't care. You hate the entire FedGov so much you WANT to see it fail. Including Social Security, Medicare adn basically the whole thing.
People in category #2 I sympathize with, but disagree with. These things never turn out well. Newt tried to shut down FedGov and Clinton got a second term. If you don't "kill the king" -- that is cause all of FedGov to fail you will end up worse off than you are now.
People in category #1 are stupid. You don't know what the hell you are talking about. It's exasperating that so many people live in the conservative Talk Radio echo chamber.
Honestly. Do you really think Sean Hannity understands how bonds work? NO! He does not. Even Hugh Hewitt (a Harvard grad and law school professor) has shown himself to be way over his head on this.
No debt ceiling increase = not enough money to roll over debt coming due in August = Default of USA = Argentina 2000.
Come on people. Grow up and act like the mature conservative we are supposed to be. Yes, FedGov is too big. But the solution is not cratering our credit, causing our cost of funds to triple, and destabilizing the world financial system.
I hate FedGov no less than anyone here. But I like being able to buy gasoline. Screw this up and we won't be able to buy it - the Saudi's will reject our failed currency.
Come on guys, grow up. We took 50 years to get here and we can't get out of it in ten minutes. All you Freeper Vets: ready to get NO PENSION next month? We are $300 Billion short of what we nee to roll over debt: EVEN IF WE DEVOTE 100% of FedGov income to debt in August of 2011.
We are hosed, but this is not a rational response.